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Electronic Arts forecasts sales below estimates as gaming craze cools

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·2 min read
An Electronic Arts office building is shown in Los Angeles, California
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By Tiyashi Datta

(Reuters) -Electronic Arts Inc on Tuesday forecast quarterly adjusted sales below estimates as easing COVID-19 curbs temper the gaming rage seen at the height of the pandemic by unlocking other avenues for entertainment.

Rival Activision Blizzard had also delivered a disappointing second quarter, while Sony Group Corp trimmed its annual profit forecast after its PlayStation business faltered.

U.S. consumer spending on video games fell 11% in June and is expected to decline 8.7% in 2022 on growing recession concerns, supply snags and a lighter slate of releases, according to analytics firm NPD. https://bit.ly/3Spdwwr

The gaming industry is considered by some as "recession proof" as it offers a relatively cheaper source of entertainment, but EA Chief Financial Officer Chris Suh said the company is not "completely immune".

"There are parts of the business that I think are doing better and parts of the business that are maybe doing a little worse than we would have anticipated even a few months ago."

The video game publisher behind "Apex Legends" expects second-quarter adjusted sales between $1.73 billion and $1.78 billion, compared with analysts' estimate of $1.87 billion, according to Refinitiv data.

Suh also said a stronger U.S. dollar would impact the third and fourth quarter.

First-quarter adjusted sales of $1.3 billion was lower than last year's, but still beat estimates thanks to the popular "FIFA" franchise and the recent "F1" launch.

"In fairness, it is impossible to expect the same growth momentum, but now starts the period where we'll see if EA has managed to make use of its good years and access to abundant capital to insulate itself from what's to come," said Joost Van Dreunen, a lecturer at New York University Stern School of Business.

Shares of the company, which also reaffirmed its full-year adjusted sales forecast, rose 1% to $130.50 after the bell.

Excluding items, EA earned 47 cents per share, compared with Street estimates of 28 cents.

(Reporting by Tiyashi Datta in Bengaluru; Editing by Devika Syamnath)